The National Skills Fund, the missing R5bn and Blade Nzimande’s request for confidentiality

7 Nov 2022

Over the past two weeks, Parliament has heard details about the National Skills Fund, an entity meant to fund skills development initiatives. From missing money and confidential reports to bad financial statements, Daily Maverick unpacks the goings-on at the agency. In a country where 4.8 million young people are unemployed, the fund is of crucial importance.

The National Skills Fund (NSF), which is meant to focus on the education and training of learners and post-school education, has made headlines in the past weeks over the long-standing issue of R5-billion that “could not be properly accounted for over two financial years”, according to Higher Education Minister Blade Nzimande, causing an outcry from Parliament’s public funds watchdog and higher education committees.

What is the National Skills Fund and why is it important?

The fund’s primary activities are focused on the education and training of learners, post-school education and training, and skills development research, innovation and advocacy. According to the Department of Higher Education and Training’s website, the NSF funded 137,019 learners in education and training programmes between 2015 and 2020.

The entity, which falls under the Department of Higher Education and Training, receives its revenue from skills development levies as well as interest earned on investments held by the Public Investment Corporation.

In a country where 4.8 million young people are unemployed, the fund is of crucial importance.

What’s going on here?

On 30 August, Nzimande was due to appear before Parliament’s public spending watchdog, the Standing Committee on Public Accounts (Scopa). This meeting was postponed after the ministry sent an email on the morning of the meeting asking for a postponement as Nzimande was out of the country, according to the Parliamentary Monitoring Group.

The next meeting was held on 13 September, when the committee wanted to find out about a forensic investigation into the financial affairs of the NSF after a report found R5-billion could not be accounted for by the fund.

That report was completed in March 2022 and MPs who sit on Scopa wanted it — but it was not submitted to Parliament. During the meeting on 13 September, Nzimande said the report contained the names of implicated persons, which could lead to possible litigation against the department.

On 27 September, the committee met again, now with an absent Nzimande asking for the report to be treated confidentially, which MPs did not want. Bheki Hadebe (ANC) said there was not enough time to engage legally on this issue, and stated that it was unacceptable, uncalled for, and was a “deliberate attempt to suffocate the committee from executing its work and mandate”, reported the Parliamentary Monitoring Group.

A legal opinion heard at Scopa on 28 September found that there was nothing stopping the report from being made public, which led to a letter to Nzimande stating that the committee would not adhere to his confidentiality request.

Nzimande’s responses

On 29 September, Nzimande’s office said the department was “steadfast to deal with instances of maladministration and corruption at the National Skills Fund (NSF)”. In addition to the forensic investigation, Nzimande had appointed a ministerial task team to conduct a strategic review of the fund, its operations and “its efficiency and relevance with regards to the national skills priorities of the country”.

He confirmed “amounts of just under R5-billion could not be properly accounted for over two financial years”, which prompted the forensic investigation into the fund’s financial affairs.

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Nzimande touched on the Scopa meeting, where he stated the department had met the Hawks and other law enforcement agencies and started internal departmental disciplinary processes.

“This is the reason we requested Scopa to treat this report as confidential until these processes are finalised and the relevant people informed, in terms of due process,” he said in a statement.

In a briefing on 20 October, the deputy minister of higher education, Buti Manamela, said that the ministry and the department had “no intention of trying to sweep the forensic report under the carpet”, according to the Parliamentary Monitoring Group.

Have law enforcement officials become involved in the crisis?

At the meeting on 20 October at Scopa, the Hawks’ national head, Lieutenant-General Godfrey Lebeya, confirmed that on 17 October, there was an engagement to request certain documents, and by the next day, these documents had been provided. According to notes from the meeting, Lebeya was “hopeful that the rest of the documents would be forthcoming”. A case had already been opened at the Pretoria Central Police Station.

At the same meeting, the Special Investigating Unit (SIU) confirmed it was working with the NSF and the department on this issue, including pursuing a proclamation that would allow the SIU to assist the department in plugging significant gaps that had been left by investigators.

MPs respond — and a call for Nzimande to resign

On 26 October, the chairperson of Parliament’s Higher Education Oversight Committee, Nompendulo Mkhatshwa, said she was shocked at the findings of the report and extremely concerned that taxpayers’ money could be used so “fraudulently”. Another MP, Walter Tebogo Letsie (ANC), said the report was “bad and irritating”.

DA MP Chantel King, who sits on the committee and is the party’s spokesperson on higher education, has called for Nzimande to resign over the mess.

“It is clear that a central avenue for funding students must be created to administer all state funding for knowledge generation, training and skills development to ensure that that all applicants receive a fair bite of the apple and some do not unduly benefit by double dipping,” she said on 27 October.

What about its financials?

According to the NSF 2021/2022 Annual Report, the entity received a qualified audit opinion from the Auditor-General’s (AG)’s office, with the office highlighting skills development as an issue. “The public entity did not have adequate systems in place to account for skills development funding,” read the notes from the AG.

In addition, AG Tsakani Maluleke said she was unable to obtain “sufficient appropriate audit evidence that skills development funding for the current and previous years had been properly accounted for, as evidence that the services had been received could not be provided”.

The AG said this was due to “inadequate project monitoring and expenditure approval processes. I was unable to confirm the skills development funding by alternative means, as the public entity’s systems did not permit this.”

Previous audit findings include a disclaimer in 2020/2021, when the AG said: “The public entity did not have adequate systems in place to account for skills development funding, as expenses were not recorded in the correct period.”

What next?

A proclamation by the SIU needs to be drawn up. In addition, Scopa has requested quarterly reports and updates from the department on its progress. DM

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